Software License Agreement And First Sale Doctrine–a Review Of The Usedsoft Case Of CJEU

Determining the legal nature of software agreements has always been a great challengefor legal researchers. Particularly controversial among researchers and judges is how tointerpret resale limitations related to software.In the first decision of the Court of Justice on software licence agreement (UsedSoft vOracle) in2012, the CJEU held (i) Oracle’s software licence was a contract of sale,(ii) thedownloading of the software from Oracle’s website by the licensee (now considered apurchaser) exhausted Oracle’s right of distribution in relation to the copy that came into thepossession of the licensee and (iii) it was therefore not an infringement of Oracle’s copyrightin the software for the licensee to resell his licence thereby making the trading of second handlicences and/or copies of the software lawful. The judgment of the CJEU is open to criticismon a number of grounds.What does US courts have to say about all this? In2010, the Ninth Circuit in Washingtonhanded down a landmark ruling in Vernor v. Autodesk. There, the court ruled that Vernor, hadcommitted copyright infringement by selling copies of computer software on the popularauction site. Though Vernor claimed his sales were protected by the first sale doctrine, thecourt ruled that this was not so because Autodesk, the creator of the software, had included alicense with the software that outlined significant use restrictions imposed upon any purchaser.As a result, no“sale” had taken place, and Vernor had merely purchased a license—subject towhatever restrictions the copyright holder saw fit to impose. The court’s ruling created asimple, three-part guide for a copyright holder to create a license that would negate first saleprotection.As the CJEU’s decision is about the interpretation of secondary European law, it hasbinding effect on the courts in all Member States, and hence may well influence the legalassessment of software agreements among legal researchers and practitioners in the nearfuture. In order to fully cover the legal issues linked to the nature of software agreements, it isworth first providing an overview of how such agreements have been legally classified inselected European jurisdictions, followed by highlighting the relevant differences to the legalsituation in the United States. The end result is that under current law and due to technological change, secondarymarkets software are no longer protected by the first sale doctrine. While certain measures canbe taken to save the doctrine and keep these markets alive, doing so is ultimately futilebecause technology will only continue to evolve—and in a digital economy dominated bydownloading and streaming media, first sale will have no logical application at all. This isbecause media is becoming increasingly ephemeral, divorced from the constraints of physicalobjects like optical discs. This shift from physical to digital has no logical home in theframework of first sale, which was created at the turn of the20th century with the freealienation of purely physical objects in mind.The judgment of the CJEU is open to criticism on a number of grounds in this article.